to protect itself against losses? when you were at fha, there was a rule to cap sellar concessions. the rule was proposed a couple of times. they were extended above the gse loan limits where you could get an fha loan bigger than any gse loan. those would be two on the table. you sometimes hear about risk- based pricing, that fha should be considering. >> i propose to the seller concession change and i think fha should not have policies in place expose that in that

regard. let me talk about the risk-based pricing. i hear it comes up from time to time. one of the mission roles that fha has served is an access point for demographics that otherwise would not gain access to the home buyer market. if you look at the way pse has priced the mortgages today, at the high end of the curve, it gets expensive for no-down- payment borrowers. if you can control for qualification, for documentation standards, credits or the ability to repay variables, the down payment should not be a variable and tell you get into a distressed scenario. you can control the distress by making sure the standard is there. we also know down payment is the single biggest barrier to home ownership. it particularly in packs those borrowers who do not have large amounts of inherited wealth or

disposable net income. it is heavily predominated by first-time home buyers, african- americans and hispanics. 80% of all mortgages last year getting a loan to the program, because there is no other resource. given that, those are expected to perform very profitably for fha. my worry would be if you risk- based price, you create societal impacts the do not reflect the quality of the loans being originated in the first place and cause a disparate impact unnecessarily. focus on credit quality and try to avoid terms that create adverse selection. not over correcting in such a way to have unique outcomes demographically. >> anybody to add? fha does not have too many levers. would you have a concern that

you raise premium so high and drive away the best credit and have a traditional insurance modeled deterioration, where you are now bringing on the weakest credit while driving everyone else away? >> we have a tricky conceptual issue with fha. if we thought the mortgages would not pay for themselves under the most reasonable economic scenarios, then it would make sense to tighten the credit further or raise the cost further. we have been raising the cost a lot. we are able to do that because we are in a very low interest environment. we may find ourselves in a different in varmint in which they will have less choice. the actuarial estimates are that the fha books of business

will more than pay for themselves. what we're looking for them to do is pay for the losses we incurred when we were playing a counter-cyclical role. the phrase i always use, it is inherent to an insurance model. fha does it for a public purpose. there is a point at which -- i have had plenty of economists argue that it is not rational for us to charge today's home buyers more than it costs us to pay for the losses of the past. we had a large, traumatic, national emergency. think of it as the hurricane sandy or hurricane katrina of the housing market. maybe the public sector ought to say -- the economists say we should write the check for the

treasury and we should go back to starting the future homebuyers at a price that is rational. the financing mechanism and the like. i think we should do that, with there are limits to how far you can do that. there are limits to what you can do with the pricing. when the private market comes in, they're going to take those and take the business away from

the fha. i will celebrate that, because that is business that the private sector should do. we are waiting for it to come in order to get them into that market. >> any changes you think the fha ought to be considering? sometimes we hear about the fha crowding out private capital. do you think there is a case to be made to bring the fha loan limits down? >> no, i do not. the product -- the problem with this point for the private sector is it is not they're not all may for the 700,000 and under. it is not there for the 700,000 and over either. the private sector needs to be repaired substantially. it is not there yet. there is great fear, an aura of toxicity over the market. there is lending going on, portfolio lending that is being done out of relationships. this is not at scale. right now, there is a great deal of work that is being done. sec is proposing their securitization rules for

plumbing. all of that has to be in place with far more sense of security going forward -- there is no alternative. in the meantime, there is a chicken and eggs story here. if we did not have stable markets, that would be a separate reasons. how do we assure that we do not have the kind of crisis? we have to make sure we do not take any major steps away from the support to the market that is there to destabilize the market. the market is strong -- strong is the wrong word. it is recovering. but it could be destabilized. picking up on what sarah said, it is totally appropriate that a long-term pricing be adjusted upwards to recover from borrowers in this period.

it would be a major mistake to price immediately the loans to recover the next few years. as a long-term prospect, it makes perfect sense. that relates to what david was saying. another problem with pricing is the logic of it. you do not risk-based price one moment in time. you risk-base price for next year, whenever you see. the bar or risk changes over time with the -- the bar or -- the borrower risk changes over time. it changes again the following year and will lead you to price risks. that is exactly what the private market does.

the private sector, as we know, was up to $1 trillion at its height. that went down to where it is today, $1 billion. those are the kind of swings you if you go through the risks that are in the market at the time. >> your point is, when people say there is a capital re that comes back, it is not. >> is not there yet. i think it will happen. again, there needs to be the funding in place to have a sense of transparency. i put out there, a major point for quite awhile, the need for transparency, not only for the public sector, but particularly for the private sector. that will help bring confidence back. it is not there yet. >> you talk about sustainability. when we talk about the fha in the medium to long-term, and we have heard some criticism that

the down payment standards, 3.5%, they were 3% in 2008. there was a push to eliminate down payments as early as mid- 2008. you heard the criticism that this is not helping the people that we're trying to help if, in a declining home price environment, folks may be upside down from the minute they walk into the house. do you think there needs to be a rethink where the down payment limit is, either now or five years from now once the housing market is more on the mend? >> it has a lot to do with what our expectation is in terms of how the economy is going to perform and what will happen to the trajectory of house prices. in an environment where the economy is strong, house prices in most markets are, at worst, flat, generally rising. i would agree that borrowers will be accumulating down

payment, reasonably steady income. the risks of default are manageable, covered with in the premiums. the problem is we feel we are in an environment of slower economic growth. there is not a lot of when under the sales, which means that the possibility that you can have recession is more likely because you're starting from a lower growth rate. house prices may be on a much flatter trajectory. then it is a question about whether the low down payment program is necessarily the best, even for the borrower. when you factor in -- and here is where downpayment does matter, because it is the culmination of a bar or -- the

combination of a borrower, that is the determination of whether you get a default. the possibility that house prices decline in your market. house prices are very sensitive to what is happening in the economy. then we could see default rates start to move up again. that is a question of how do you balance the benefits for the folks who make it through and gain access to home ownership earlier than they would have otherwise or maybe they never would have owned purses the cost of the families that will go through a default and a foreclosure? what is required sustainable home ownership? it is a difficult question. it is one we need to be mindful of when we calibrate this public policy around how low do we want to push those debt payments. when things are getting better, than you can start lowering the downpayments. that is what we ran into with the subprime problem.

>> if you raise a down payment, interest rates are low. it is already difficult for some folks to save. their equity is gone or their other sources of downpayment have also been hit by the recession. is there too much emphasis on raising the down payment right now? >> i think it is. as important as down payment is, at the moment, i do not think we are out of the woods yet. increasing downpayments now would hurt the fragile recovery we are having in the housing area. i would be very careful to do it now. as we get out and the economy gets better, again, fha has 3%

down since 1961. if you price accordingly, that is fine. there is a reason the down payments and loans are sustainable. once we go back to normal times, whenever that is, i think that we can have that conversation. >> this debate has gone on since i was commissioner, when the funds went below 2%, the reserve did. i have heard the debate over 3.5%-5%. at the end of the day, is that a measure unto itself that will create immeasurably greater risk control for the fha as

opposed to having a good credit management protocol that requires underwriting standards that will provide sustainability? you can eliminate risk in its entirety. he can acquire 20% down payments and all sorts of other variables that will ensure that you have no risk. fha is a neat program. it has an extremely high mortgage insurance premium applied every single mortgage that can support -- and it is a terrible way of putting it, but it is a fact -- it can help prevent teen delinquency rates. this country was on a housing bubble the was promulgated by bay crisis. you create an unsustainable and farm for anybody participating in that market. it impacted the housing market and a whole bunch of other

markets that were impacted in a significantly adverse way. i find it really interesting, when you look at the fha portfolio compared to all of the other mortgage portfolios that existed, it is the one that has survived in the most healthy manner compared to any of them, with the worst credit attributes. as recently as 2012, the past both years have caused strain. even beyond that, it is still going to go positive with the future premium. there is no doubt that a bigger down payment is better. no doubt that more private capital engaged in the market is better for housing. this is the son of an unhealthy market. i have said this continuously. we are in an environment where there is no private capital coming back. ratings agencies are not trusted. mortgage insurance as a way to combat so that they will value higher products. private investors do not trust the mortgage-backed securities

market unless it has the best loan values. in the interim, we are caught in an environment where we're losing support until we have a replacement vehicle in place. we talk about getting the fha out of the market. there is very little time to focus on the pathway to private capital. that is the greatest challenge. you can lower loan limits and those are not the risky loans. if you reduce fha's role, it would hurt home buyers in san francisco. the key thing is hurting the rest. look at the premiums that are being charged. if we can maintain that focus, the risk regiment focus that the fha has taken on, there is an argument to say, let's not over correct in a time when there is no support system coming down the pipe.

>> you talk about the importance of having good underwriting standards. one of the other criticisms of fha is that it is a government agency that is not as nimble. long-term, if you have 3% down payment, it is one thing to trust that the lenders to use the program will operate according to the guidelines, but does the institution have the bandwidth to change circumstances? even if it were not as severe as 2006, say we go through a period where congress allows downpayment-funded assistance. how able is the fha to set those proper underwriting standards? >> there is no question that the fha any other agency needs to be more organized than what we have today.

fhfa it is 80 years old. it has never required taxpayer money. the fact that we have a 1000- year flat and fha has plans for a 100-year flat, it is unfortunate, but it has worked out somewhat well. >> what we should be thinking about is, how do we take advantage of this opportunity to learn how to do the modernization that roberta talked about? we did learn about ko'd during

this crisis, when fha wanted to change its standards and eliminate a program that was clearly costing it a significant portion, having an agency which does not have the authority to act quickly or to try out new products on a small scale before they decided they make sense on a large scale is not nimble in a federal, statutory set of guidelines. one of the things we're trying to develop is, how do we make sure that the fha managers do not have to go back to congress every time they want to be able to take steps, to take a risk mitigation actions that a private lender would be able to take?

you have to be willing to have transparency about how well you're meeting a metrics. the officials who are in charge of managing the fund, they will do that better than a process that has to go through the natural legislative process to get those answers in place. we saw that with down payments. that was a program that many members of congress believe are in the same place. we could not get the week -- we could not get them to turn the spigot off. it took a long time to get them to go along with it. we need to come up with risk mitigation tools for fha. we have not gotten to what the future system should look like. especially in a world in which we will have the gse's and

conservatorships will also be transformed into something that protect the taxpayers, that we, in that world, we empower policymakers at fha to be able to protect itself from risk when the emerging system might have hiccups of its own. >> you co-authored a paper earlier this year looking at whether the agency had done proper modeling for its risk. one of the headlines was a potential 30% delinquency rate on those 2007, 2008, 2009 books. do you think that the agency has made the kind of changes needed to properly estimate what their potential loss exposure is? >> we heard in the opening

marks, and if you go back and read the last several years of reports, discussions about innovations in the risk analysis. hopefully some of the work that i have done helps to contribute to that thinking. it raises a broader question, which is, clearly, entering into 2007 and going forward, the fha was in choppy water. you want the best compass to try to navigate. there are scarce resources. doing this -- these types of risk analysis are very complicated. if you do try to read the book, it is very detailed, very

difficult. the issue is, how do we get the best thinking possible? suppose the innovations that went into this year's audit report could have been innovative in 2007. how much better with that have been for the folks who were trying to manage the fha to have that much more early-warning? we either from more dollars added to get more resources to the fha or adopt a different model. think of an open source model, where the fha says, we are going to put all of the models up there. we will make the data available. we want to encourage outside researchers to kick the tires and give us your best thinking. let's try to speed up the learning curve. this was an approach taken by the bank of england when they gained independence and put out their first monetary policy report. they put on there website their forecast, the data, the models, and they invited economists to critique the models. they viewed this as a welcome thing. that is a challenge. are we moving down the learning curve fast enough in terms of doing this kind of risk analysis? if not, then i think we are losing out on the ability to

steer the program better. this is something that is worth discussing. >> every year, we have heard that the past few years have been bad, but this year is good and next year will be even better. in the following year, it changes a little bit. we have heard the same things a couple of times. how much confidence should we have that the 2010, 2011, 2012 books will hold up very well? the earlier books did have a negative economic value. >> it is a model that is based on the home price index and interest rates. those are the biggest drivers of the model itself. some would say the unemployment drives that outcome. those of the variables were you see the greatest swings. what impact did the reverse mortgage program have? it had a particularly the -- it had a particularly adverse impact this year.

that is because of variables that are driving that outcome. if it goes back -- going back to what joe was saying earlier, we need the economy to keep recovering and the performance would be better. if you look at the study, and i think they have done a good job, there is a variety of stress testing that goes on in this process. they did not show all the simulations, but they did show what variables work. there is an attempt to be far more transparent in the study. obviously, forecast are forecasts. >> in order to create a capital ratio or a budget for congress, you have to create a point. the notion, in the real world, you're looking at a range of

possible outcomes. the point that was chosen is based on the set of the best assumptions about house prices and when the recovery would come. you can ask most policy makers in any government program that is affected by the economy how quickly they thought that those things will start to improve. for the most part, economists were predicting return to growth in the economy and increases in employment sooner. the biggest reason why we thought the next year would be better, we thought the cost of the poor mortgages that originated earlier would be less than they turned out to be. that is because the economy turned out to be weaker and the sustained suck on the business, those people's lives, was not relieved by its improvement.

>> the one data element -- and carol had it on her slide -- look at the seasonal delinquency curve. there is a clear performance variable at the same seasonality from the 2005 book until the 2010, 2011, 2012 book. they're different outcomes. >> even in a stable period of time, when we are looking a delinquency rates in the low- teens, is that a reasonable level of serious chilling wednesday? -- delinquency? we are going back to the issue of sustainability. >> i would like to switch from short-term delinquency to looking at a cumulative one. ultimately, the question is, what is our tolerance for failure?

i would argue that our tolerance for failure is different in different economic circumstances, especially for counter-cyclical organizations. the amount of cumulative loss -- cumulative loss is the number of families whose homes and lives are destabilized because they lose the ability to have their children grow up in the community and home that they are in because they cannot afford the mortgage anymore. that has social development effects on kids, community effects on the home values. what is the right label of failure that we are willing to cede, to accept? in a well-functioning private market economy, the role of fha

is to give other people the ability to access the benefits of home ownership and the ability to access the wealth- building attributes of home ownership undermost economic circumstances and the ability to create to stabilization of communities through shared ownership. that benefit, which we, as a society, have over-emphasize, but needs to be part of the middle-class lifestyle, we want to add at the margins. if you take 100 marginal borrowers, we have an idea in our minds, under good economic times, how many of those we are comfortable failing in order to get the others success. in good times, a failure rate of 10 is a question. 20 is way too much. a five-year rate of five is plenty, especially if the losses to the fund are not that

great. a failure rate of 10, we are starting to think about that. under a stress environment, you tolerate a higher failure. what are the costs to society and the cost of that failure? we are starting to answer questions about that. we have not looked at it hard enough. it is really interesting going forward. >> one of the challenges is the chart we're showing does not answer the question. it is showing you the cumulative default rate on mortgages.

if they streamline refinance and then go delinquent, the delinquency is not linked back to when they came into the system. that serious delinquency is not being shown anywhere. we cannot start dealing with the tough questions about what is the trade-off if we don't first mentioned -- measure the trade- off. i would encourage the fha to go back and recall that chart. then we start saying what is the reality and water were comfortable with. >> for the question of what rate are we comfortable with?

there are people who will be more likely to fail and those that are more likely to succeed. perhaps that is actually where we are. sometimes we have recessions that are serious. we cannot predict those. should we be planning for those? we have no idea where they will happen and what they are. we should be planning for assuming a moderate, predictable, with some ups and downs -- in here is another reason we cannot plan for it.

we cannot determine what the failure rate is. if we have another -- and the private sector will come back -- when they come back, there will be closed capital which will be cyclical, and that will raise prices and it will cause bidding races for homes as before. their book of business and their failure rate, which we cannot control, will in fact impact the volatility and stability of the overall housing market and therefore a fha outcomes as well. that said, a long-term mission of fha has to be those people

who can be today underwritten to be in their homes for the long term, using the best metrics we have. those are the loans we should be making. >> two quick points, it is great weekend have a panel and debate fha. it is one of the most scrutinized lenders in america. we did not get that opportunity for other firms that went through there and crises. that is an interesting variable. if you go back to the question, is fha capable to handle their creaky organization? i think that is where the debate lies.

we want to help fix fha. you can shrink them forcibly because he did not want the baby and your anti-government. that is a separate debate. the want to help fha, give them the ability to be flexible, invest in systems, a higher risk management people, contract with forms that wanted to effectively, to do reviews, etc., and the more you contained in their ability to control their risk, that is where the taxpayer gets harmed. their systems are antiquated and terrible. when sarah was at hud, there was a plan put together to talk about a different structure for fha, where they would take their own proceeds and reinvested back into their technology, like a business can do, and the fha is restricted. i had to go to congress and ask them to draft a bill and get legislation to allow us to raise premiums to protect our risk. that is the proposition for success over the long term. that is where the debate should be.

how do we make this realization most effective, with best deals, best credit risk, so they can support the system and a little less about let's continue to pull the support out from under them? >> can you do that, because if you can, then the things you talked about are true. but if there are limits to what legislation does or does not do, and doesn't that raise questions over all these other things? a lot of the loss mitigation of the administration has been trying to encourage the private sector what they are limited to do on their own book. if you are making low downpayment loans and think principal reduction is the right way to deal with underwater borrowers, that is where i am going, is that achievable what you are talking about? >> i say with great respect to

my friends on capitol hill, any group with 535 people do not write underwriting standards well or manage the technical aspects of the business well. there are many examples of policy frameworks with metrics for performance and transparency that then do not have the details being decided by the legislature body. if we were to look across government agencies, what you need to do to get people comfortable with that is you'd need to be able to do two things, show how the flexibility works and used to protect the taxpayer, and you have to be clear but those protections are, and you need to create methods of transparency and accountability that get people comfort that you are not going to take it off into the

private sector. there has been some members, policy members want to take credit for a new innovation or a new borrowers being served. this experience is a moment when people can see that that, taking credit for the good means you have a barrier to protecting the taxpayers against risk, and that is the moment to talk about going to a performance measurement system rather than a prescriptive system. >> i cut you off. >> whether it be 5%, 10%, this is what you cannot micromanage or congress can micromanage.

this is to price these so we did not lose money. to the extent fha does that, it is better suited, and if you have to go back to congress, you get involved in the political process, it takes time to get it done, which it did with the downpayment assistance program three or four years later. the more fha can assume some of the powers to stay in business, they should solve that. >> i appreciate our discussion. there may be folks in the audience who want to get in on this. we will open it up for questions. if you have a question, and to give yourself and ask a question in a relatively short time frame, or i will cut you off and ask you to state your question. is there a microphone?

there is a microphone and we will -- >> i am alejandro with the national association of hispanic real estate professionals. thank you very much for an excellent and balanced presentation. the commissioner stated that 73% of the fha loans were going to first-time home buyers. 15% african-americans, 49% hispanics. my question is do you know what the data is in terms of how many loans in total are going to first-time home buyers, and in the short and long term, and terms of the world, a first- time home buyers will have, you see their impact in the recovery of the housing sector? >> fha puts out a report and breaks down this data. i encourage people to look at this. it is on the website.

43% -- [indiscernbile] 43% of home buyer loans. it is a great report, and there is a monthly report which they break down all but volume of refinance purchases, and they break it down for home buyer categories, and it is public information, so i encourage people to look at that. >> what does this mean for the overall market, and it is critical for the overall market that there be a first-time home buyer market? this is 43% of it. there you go. >> i am tom stanton. i teach at johns hopkins university, and i would like to talk about administrative capacity, which is different from the discussion of

authorities that congress might give fha to adjust premiums or what ever. i am curious, sarah, you and nick would see this and that made 1990's thought and the private mortgage industry killed that so fast all of our heads spun. i was told how much they disliked the idea. what are the politics this time around, because that strikes me as one of the few ways one could get to the improvements in people, processes, and assistance. >> well, my experience at that time is one that i think about a lot, what the opportunities are now. at the end of the day, there were two sets of ideas embodied in the proposal we had at the

time. one was the ability to deal with the administrative flexibility and hiring a computer systems and the like. the other was programmatic, giving us the ability to essentially doubled the products that we serve a long performance measures. i think the real objection to what came from folks in the industry was about the product flexibility because the ability of congress to micromanage the product meant industry players who were feeling competitive with fha had a mechanism to try to put downward pressure on fha's loans in their face. fha should be in the private sector must face only went in needs to pursue its function. there is always around the margins a debate about where that is. those dynamics not any different today. that said, we were talking about

that before, which is that fha was plenty healthy at that point, we recovered from the debate, and we were trying to be relevant to the market. today is a very different world. there is no debate about whether fha is irrelevant. the principal focus is how do we make sure it serves the purpose without exposing taxpayers to too much risk, and the notion of more flexibility attracting higher skills, improving computer systems is much more attractive. i am highly optimistic this can be done, but with dynamics being similar? perhaps not, but the imperative is much clearer than it was at the time, and there may be ways to disentangle flexibility is that will separate out the risk management, and i would argue

for product innovation, but from the flexibility from designing products. >> there is another difference. based on the theories of the credit reform act, fha caps directly into treasury, and in terms of a government corporation, you need an act of congress for any money to cover in the economic value, and then you need -- and that can be more politically difficult. >> fha is a corporation already, and you know more about that. many ways that does not answer the question. the question is a government corporation with what powers? we use a government corporation

as a shorthand for something that is less bureaucratic and more able to operate like a business within the parameters of federal support charged, and in some ways the question is what are the authorities to protect for risk and to design programs, and does have positive and negative consequences. >> there are ways to come short of federal corporations and give it fha flexibility to reinvest some of its premium or negative subsidy for the budget back into the system. one thing i find remarkable about having to spend some time inside a federal agency is you get funds appropriated for a new systems technology environment and that takes years to research and build as anybody knows from the private sector if funds are available for that year. all of a sudden you have these awkward and disadvantageous incentives to spend money in a short period of time when you

would rather be able to do it thoughtfully, and the constraints of working in an annual appropriations cycle in a business that has flexes inward and outward based on market dynamics, and be helpful if congress gave it the authority to use subsidies back so they can do this on a scale. it would give them an incentive to continue driving subsidies back to the budget in order to have that flexibility. so you would have an incentive to drive better quality for the taxpayer. there are different ways to get there without having to get to fha corporation, which has been one of the examples that has been discussed and debated over many years. >> any other questions, either for the panel or the commissioner, who was also here? >> i am with the national association of realtors, and i

have a question for carol. i understand 100% the rationale of that. is there a risk of good quality borrowers leaving the program and refinancing out of fha? what is the impact on the fund up on that? >> yes, we have in analyzing what the reversal of that policy would do in terms of the overall economic value, it assumes a certain number of people are going to refinance the out of the book of business. that is built in to the economic model. i would also say that obviously, it depends where interest rates are, but people can do a streamlined refinance three years from now and take advantage of where rates are actually lower, and stay in fha.

there is a variety of options for people. we do not think it is bad if they have the ability to refinance out to go do that, an fha will have served its purpose, covered its risks, and that is fine. >> any other questions? if there are not, i will ask one. maybe i will ask the commissioner this question -- one of the things we did not talk about that the fha has also been doing is legal settlements or lawsuits with the department of justice, and there is a push to change the language over what lenders would be responsible for with respect to fraud. obviously, there has been a problem for a long time -- fha has been pretty aggressive over the past five years trying to root out bad actors, but i wonder how you would calibrate

that balance between ensuring that the program is open and that lenders did not come in with overlays. having seen that with gse's, not so much with fha, so i wonder how concerned you are that any kind of increased uncertainty would lead to a pullback in fha. >> we definitely want to create rules of the road moving forward said that it is clear for lenders, what is material, where we are going to be concerned about, what they have underwritten or have for servicing, and making those rules as clear as possible so that everybody knows moving forward what the rules are, and i think the environment that we have been in these past five years is that some of those

rules have not been as clear to people as they would have wanted. that has created one of the factors. there are multiple factors while lenders are creating overlays. i think this is one of many. you can ask dave percentage he thinks this is, and that is whether lenders' perceptions, what percentage of the reasons they're pulling back on credit -- everybody will have a different perception of what the litigation risk is versus servicing risk or servicing compensation, or a whole for item of things that are going into the credit overlays, but we are committed to getting rules of the road clear it moving forward so that people know. >> one of the great concerns we have is this thing of over correcting.

one of the proposals we have seen suggested by hud is the idea they would remove the known or should have known language and turns of the indemnification risk to the institution. i do not think it is an understatement to say there is an exacerbated level of concern following up from the lawsuits against one of the large servicers which could involve some of the damage risk. on top of removing a clause like this, which in many ways you pay for insurance in the first place, and that is what the premium should cover. my fear is that if we see the same reaction we have seen with gse's, it will result in the same outcome, nick, that you just referenced as a possibility, lenders will pull back on the credit reins on

their own. if that goes to 580, it is not the way, because it goes above and beyond the minimum credit risk levels of the fha. if you go to far, we reach a tipping point, which will impact us in communities that alejandro referenced in his question. there will be a lot of response to some of the proposals, while trying to help fha mitigate risk within reason. >> not to get into a debate

here, and i know nick wants us to debate anyway. there is also a line, where is fha distinct and where should there be -- where should it be aligned with other institutions so you are creating some common set of expectations? some of what we are proposing including the known about or should have known of fraud is something that is more common in other to financial institutions. being sure there is one thing to ensure that fha is taking on no risk to your credit, that we perhaps are designed to do, but it is different to say which should be taking on a particular risk around fraud that no other financial institution is willing to take on, that we should have some common set of standards around that for the lending community. >> to follow up, we view fha as an important partner, and then known or should have known cause is something that the

gse's -- we will provide helpful feedback. >> am sure you will. >> hi, bloomberg news. earlier this week, a person at the federal housing agency suggested an overhaul of housing finance in the country should begin with fha, then we should figure out from their what to do with the gse's. i wondered what foot on the panel think about that idea. >> i did not hear at, but let me talk about the relationship between fha in the future and the rest of housing finance system in the future, because it is quite important.

but what you think fha's role in the market is and its exposure to risk will depend on what the successor system to the gse's looks like. it is important to remember that fha is effectively 100% insurance products. almost 100%. there are risks and other things that are implicit. the government is taking on principally the credit risk in an fha loan. and what i would call an ideal conforming market of the future, in my view, the government should be explicitly offering a guarantee on some

form of mortgage-backed security, or other transaction structure, in which principal credit risk is borne by well- capitalized other institutions, private capital ahead of the government, and the government is in essentially offering a liquidity assurance to investors that there will be an ongoing market for the securities in the future by saying that if those credits bearers to get so stressed they would -- if they were to fail, the government would stand behind them. that is a far more limited risk, and in the future, if we pay for that risk, the question is what do you what the government doing for most of the housing market? you do not want it taken the full credit exposure it takes in fha for up to 60% of the housing market. you want it doing that for the part of the market where there is a public purpose to be served. the acquitted the objective that it provides, where it takes a far more that it rests, if the prices it and does it

explicitly, should be on the mainstream market. if we decide that we're not want to have any successors to the gse's, then it is inevitable that fha will play a much larger role in the market and will take much more risk. >> mica said before, the way i see the role of fha, asking buffet to fill in a gap of something that it will look like. to me we need to define what the secondary market looks like and see where the gaps are. >> it is an integrated system, and how one part of it goes will absolutely implicate others, so this needs to be a broader conversation. >> this cannot be about doing effigy first, and it goes to

the point already made, when the gse's race guarantee fees, it is doing nothing of the sort. when fha raises premium insurance and purses credit back to the fse's, these are tied organizations, so it has to be the total concept of the government. >> any other questions? thank you very much. [applause] >> i want to formally thank all of our panelists, and acting commissioner galante, and we hope to see you back at a cap event soon.

>> the house is coming back again in a few minutes. just one bill on the agenda, to require financial institution to issue press notices. no votes are scheduled. but the talks continue between congressional leaders and the white house. house republican leaders have made a counter offer to president obama in the fiscal cliff negotiations proposing to cut to true knowledge with a combination of spending cuts come entitlement reform, and new tax revenues. there was a three page letter signed by speaker boehner, majority leader eric cantor, and other senior republicans including representative paul ryan. and this mornings "washington journal," we heard about tax reductions and credits that would go away if the fiscal

cliff passes in january. >> board or series looking into the so-called fiscal cliff, we turn our attention to deductions and tax loopholes. some of them are potentially on the chopping block. joining us from the wall street journal is don mckinnon. thanks so much for joining us today. what are the loopholes and deductions? we hear those words a lot, but what are they? guest: loopholes or tax breaks of all different sorts, and whether you like a particular loophole or not depends on where you sit, i guess. there are lots of loopholes that are deductions. deductions are those that most people are familiar with. the big, itemized deductions are things like the home mortgage interest deduction. there is a deduction for state and local taxes that is very important, the deduction for

charitable contributions is real important, and there are all kinds of other breaks that people are less familiar with. there are some that people are probably not aware of but all that are very big and important. for instance, the health care that most of us get at worked represents a big source of income to a lot of people, and yet it does not count as income on your taxes. that is a giant break that is known as an exemption. there are all kinds of other breaks that exists. the earned income tax credit goes to the working poor. it is an important source of income supplement for lots of folks at the lower end of the income spectrum. folks with children get a child credit, a very lucrative credit, worth $1,000 per child right now. so there are lots and lots of different kinds of breaks. congress loves tax breaks.

>> is there a difference between a deduction and the tax credit? >> yes, there is. if you have $20,000 in mortgage interest, you can deduct that from your income. a credit is something that typically is taken away from the tax that you go. if you 023 -- if you love with thousand dollars in tax and get a $1,000 credit, then you are down to $19,000. >> we hear the term loophole, does that encompass all of it? is it a pejorative term? >> i think it is pejorative, and when politicians talk about loopholes, you talk about things they like to get rid of. when people talk about tax breaks, it is a little more neutral, but it is generally a pejorative term. >> is there anything that are seldom on the chopping block,

things that people really want to see protected? >> almost every tax break out there has a constituency so when push comes to shove and congress starts to think about getting rid of some of these things, the constituencies come out of the woodwork. the classic example is the home mortgage interest deduction that is a sacred cow for home builders, realtors, lots of those out there in the real world. >> it ends up costing the federal government about $100 billion. who benefits from it? >> realtors, home builders, everybody involved in the real- estate business.

>> are they seeing a been a set -- a benefit from that? >> everyone that has enough wealth to be able to buy a home is going to benefit from this break. in terms of the percentage is, people in the upper middle class are those that benefit the most from this. there are certain limits on your ability to deduct home mortgage interest if you are extremely wealthy. rich folks take this break as well but they don't benefit as much as folks in the middle class. >> who benefits from state and local taxes? >> just about everybody that pay taxes. it is particularly beneficial for people in the high tax rates, those tend to be on the east coast and west coast.

and they tend to be blue states as well. at charitable gifts. who uses that? >> it benefits a surprisingly broad range of people. it is often surprising how much people at the lower end of the income spectrum give away, frankly, but wealthy people obviously done a lot. governor romney was a classic example i give away millions of dollars. >> what about special rates for capital gains, dividends, other things that particularly benefit the wealthy are in town? >> is the classic home break that benefits the very wealthy.

they think is correct that they receive more than 90% of the benefits. people in the middle class get a little bit from the outbreak, but overwhelmingly, the majority goes to the wealthy. >> home tax loopholes alone can't solve the fiscal cliff even if you'd done been the biggest tax loopholes. they don't come close to fulfilling the deficit. how significant are these deductions when we look at their role in the big picture of solving the fiscal clef? >> they can be important, the goal is not to get rid of the budget deficit. i don't think anybody has a realistic hope of getting rid of the budget deficit and a lot of people don't want to get rid of the budget deficit.

certainly, opinions differ. they can be a managing part of the deficit. >> do they play a role in negotiations and talks? there is a group advocating for every one of these deductions that people are used to getting. could they end up on the chopping block? >> definitely. >> there is also a link to see more at our website for the gop proposal. we are going live to the house. a requirement that financial restitution set of privacy notices. for what purpose does the gentlewoman rise? >> i move to suspend the rules and pass the bill h.r. 5817. the speaker pro tempore: the clerk will report the title of

the bill. caller: h.r. 5817, to provide an exception to the annual privacy notice requirement. the speaker pro tempore: pursuant to the rule, the gentlewoman from west virginia, mrs. capito, and the gentleman from california, mr. sherman, each will control 20 minutes. the chair rebling nices the gentlewoman from west virginia. mrs. capito: thank you. i ask that all members have five legislative days to revise and extend their remarks and add extraneous material on this bill. the speaker pro tempore: without objection. mrs. capito: madam speaker, i yield myself such time as i may consume. the speaker pro tempore: the gentlewoman is recognized. mrs. capito: i would like to first thank mr. luetkemeyer and mr. sherman for offering the bill before the house today. i would like to thank -- the

house has already passed one bill for duplicative requirement on the a.t.m. machine. common sense reform. i've ask that they provide this regulatory relief for banks and credit unions across the country. i know that mr. luetkemeyer share misconcerns that federal agencies have piled on more regulations without assessing the current regulatory regime to remove outdated, unnecessary, and overly burdensome regulations. last year, members of our house financial services committee urged the treasury secretary to make good on a promise from the summer of 2010 to take care as the dodd-frank act was implemented to ensure that federal agencies conducted a thorough assessment of the current regulatory structure to truly modernize and streamline the federal code. we wanted to make sure this opportunity was not missed. although secretary geithner

claims streamlining is a priority, we've seen little progress on this front. but h.r. 5817 provides an example of how both sides can come together and i would like to thank mr. sherman for his work on this as well, have come together to remove outdated requirements. under current law, financial institutions are required to provide annual privacy is notices that the explain their practices. they are required to mail those notices regardless of whether or not that information sharing practice has changed. these annual mailings cost millions each year and do not provide the consumers with new information if the practice hasn't change thsmed will require an institution to provide annual privacy notices only if they have changed their privacy rules. this will eliminate an unnecessary burden for our financial institutions. i would like to thank mr.

luetkemeyer and mr. sherman for their leadership on this issue and reserve the balance of my time. the speaker pro tempore: the gentleman from california is recognized. mr. sherman: i thank the gentlelady from west virginia for yielding to me and i yield myself such time as i may consume in support of h.r. 5817, the eliminate privacy notify -- notice confusion act. i want to thank representative luetkemeyer for his work in introducing this bill. i've enjoyed working with him on it. mr. -- ms. speaker, this is common sense legislation that makes a minor change to our banking laws to revise and very costly and unnecessary requirement that financial institutions such as banks and credit unions and other depository institutions must send each of their customers a copy of their privacy policy

every year even when that policy hasn't changed from the prior year when they got the same exact privacy notice -- notification. for banks, credit unions and other financial institutions of all sizes, this means spending a small fortune to reprint millions of complicated and long documents, then mailing them to every consumer. even when there's been no change in the policy. it is disadvantageous not only because of the time and cost in mailing these and the trees that are no doubt consumed but also because customers have no way to separate the wheat from the chaff. they're getting these notices every year from every financial institution with whom they have dealings without any indication as to whether there's been a change from the privacy policy they received just a year ago. by sending out less, we attract

attention to those situations where there's been a change in the privacy policy. our bill makes a simple fix to this problem requiring financial institutions to provide their customers with this additional notification, only when there's been a change that affects the policy or practice as it relates to that consumer. as a result, consumers will know what privacy -- that the privacy notices that arrive in their mailboxes actually require their attention and banks, credit unions and other financial institutions that have been spending millions of dollars to mail out duplicative notices and redundant notifications can redirect those savings back to providing for the consumer, to their community, or to loans to help our economy grow. madam speaker, i want to thank, as i did at the beginning of my presentation, our colleague and co-sponsor -- chief sponsor of this bill, representative lo

luetkemeyer of missouri and thank -- -- representative luetkemeyer of missouri and i want to thank our longtime colleague, ranking member of the financial service committee, barney frank, for his work in getting us to this point where we can consider this bill on the floor today. i will in short order be asking for a recorded vote on this bill, not because it needs a recorded vote. but because i've been informed by my leadership that it is important to this house that we have time on the floor tomorrow to confer with each other on members and that we have a sufficient number of recorded votes and so my colleagues should not interpret my request for a recorded vote as any statement that that -- that this bill is something we have to go on record or that i would disagree with the outcome of any voice vote but simply as an act of collegiality, showing that i think we ought to spend more

time with each other on this floor tomorrow and i know we will all enjoy that process. with that, i reserve the balance of my time. the speaker pro tempore: the gentleman from california reserves. the gentlewoman from west virginia is recognized. mrs. capito: thank you, mr. speaker. i would like to yield such time as he wishes to consume to the principal sponsor of this bill, the sponsor of this bill, the gentleman from missouri, mr. luetkemeyer. the speaker pro tempore: the gentleman is recognize. mr. luetkemeyer: thank you, madam speaker and thank you, mrs. capito, for yielding. i also thank the gentleman for his fine remarks, we will not object to a recorded vote, we have no objection to collegiality on the floor especially in a time when it seems so toxic. i rise in support of the

eliminate privacy notice confusion act. i introduced this legislation in an effort to reduce yet another unnecessary burden facing consumers and financial institutions alike. under current law, financial stewings of all sizes are required to provide annual privacy notices explaining information sharing practices to all customers. they are required to give these notices each year even if their privacy policies haven't changed in the slightest this creates not only waste for financial institutions but confusion among and increased indirect cost to consumers. h.r. 5817 would require institutions to provide privacy policy information to customers only if they changed the policy or practice related to a customer's privacy. this bill would eliminate millions of costly, confusing and other mailings that cost millions to produce each year and information included in these mailings would be more significant to the consumers

because it would only come after a change mt. privacy policy. this legislation specifically ensures that financial institutions cannot be exempted from privacy notices if that institution changes in my way its privacies or -- policies or practices relating to disclosure of nonpublic information. this is supported by independent community bankers of america, the american bankers soshese and the national association of federal credit unions among others. i want to thank the gentleman from california, mr. sherman, for his fine support and fine work and his work on this issue. i want to thank chairman baucus, ranking member frank, chairwoman capito and ranking member maloney for their assistance in ensuring that this legislation passes without delay this common sense legislation has garnered widespread bipartisan support and i urge my colleagues to join me in supporting its passage. i yield back the balance of my time. the speaker pro tempore: the gentleman yields back. the gentleman from california is

recognized. mr. sherman: i'll take a minute to put into the record the statements of adam lev tan, professor of law at the georgetown university law school, in support of this bill and he came before our committee in may of 2012 and stated there are unquestionably financial regulations that do little other than add to regulatory burdens, he cited in particular the provision that this bill addresses and said i would also urge the elimination of the privacy disclosure requirement even if there is no substantive replacement for it, but then he added, and at very least, eliminate the requirement of an

annual disclosure when there's been no change to the policy. i couldn't agree more with the professor and with that i reserve the balance of my time unless the gentleman from massachusetts who is right here wishes me to yield to him, i just saw he reentered the chamber. . the speaker pro tempore: does the gentleman from california yield for particle metropolitanry inquiry? mr. sherman: yes. -- parliamentary inquiry? smermsherm yes. -- mr. sherman: yes. the speaker pro tempore: the gentleman from california is recognized. mr. sherman: i yield four minutes to the gentleman from massachusetts. the speaker pro tempore: the gentleman from massachusetts is

recognized for four minutes. >> i thank the gentleman very much. the language which is in question here is language which was heard by mr. barton and i in 1999 as part of the consideration of the graham-leach-bliley bill. mr. markey: the language had, for privacy, none had been included in the senate, none had been included in the rest of the process. but as the bill came to the energy and commerce committee in 1999, mr. barton and i, we added privacy language. believing that as companies are able to consolidate, banking records, insurance records, brokerage records, the physical examinations of customers and their medical secrets, that there should be privacy here.

we were no longer talking about just going into a bank and having old mr. wentwort there that you and your family had known your entire life and you trusted him and there was actually a whole long family history. that is no longer the case. we're now basically living in a world where we've moved from an era of privacy keepers to privacy peepers and data-mining reapers, trying to create profiles of people, using all of their financial information as a way of basically making their companies more efficient but simultaneously compromising the privacy of families all across our country. and so while ultimately the language which mr. barton and i included on the house side and graham-leach-bliley was watered down in the final compromise, that's the privacy that's in the

bill. and so one of the things, of course, that i believed and mr. barton believed was that people should get the information that their privacy could be compromised. by these now huge megabanks. and so what this bill is saying is you don't have to notify people of that each year. you don't have to tell them. if they didn't figure that out, when the bank first signed you up as a company, they never have to tell you again. because they notified you once. right there in the beginning. no, ladies and gentlemen. the amount of information we get at home from these banks, massive, as you know. you open up your mailbox every day and there's like 25 solicitations from financial institutions all across the country. they got loads of money to do that. loads of money. you look at their tv

commercials, loads of money. you're in safe hands when you give your family's wealth over to that financial institution. but if you ask them to just provide a little information on what privacy rights they have in terms of protecting all of their family secrets inside of that financial information, the banks say, oh, no, that's too expensive. we can't do that. how can you afford that? and so this just gets right back to the same argument that we had during graham-leach-bliley, same exact debate, same exact terms. and all i can tell you is there's a looming privacy catastrophe coming in this country. people just don't understand the full consequences of what this new cyberworld makes possible in terms of the compromise of information. you know, when you're writing

out the information to buy the ritalin for your child, that's a check that the bank has. there it is. all of this has to be told to the public on an ongoing basis. i urge a no vote. i urge a no vote on this. the speaker pro tempore: the gentleman's time has expired. the gentlewoman from west virginia is recognized. >> thank you, madam speaker. i'd like to yield two minutes to my friend from texas, mr. barton. the speaker pro tempore: the gentleman from texas is recognized for two minutes. mr. barton: i thank you and want to thank the gentlelady from west virginia for her courtesy. she didn't have to do this since i'm in opposition to the bill and i appreciate. it i also want to apologize to the speaker. i should have known better that i had to be here at the beginning of the debate to claim time in opposition. so i have been reminaldsed of

that. i am in opposition to this bill, although it is very well-meaning and well-intentioned. who could be opposed to saving some money, to our struggling financial institutions when they have to send out these privacy notices and for the smaller institutions there's no question that they're very expensive. the problem is that you can't just give away your privacy rights. and while this bill does nothing about the underlying issue of privacy, it does at least require that once a year banks and financial institutions subject to graham-leach-bliley inform people that there are some privacy protections in the law. i don't think they're very strong, i think they need to be upgraded and congressman markey and i, who are co-chairman of the bipartisan privacy caucus, have legislation that does that. having said that, we should not willingly give up our privacy protections that we have and this bill would eliminate a requirement of notification, which is, i admit, not the same

as reducing the privacy that is in the law, but when you start down that slippery slope that you don't have to notify privacy protection, the next step is to not even have privacy at all. so i do oppose this bill, respectfully so, and would ask for a no vote when we call for the yeas and nays. again i want to thank the gentlelady for her courtesy and commend the sponsor for his efforts on the bill. with that i yield back, madam speaker. the speaker pro tempore: the gentleman from texas yields back. the gentleman from california is recognized. mr. sherman: i rise again in support of this bill and i yield to no member in terms of my dedication to privacy. this bill passes, you're going to get notification of what the privacy rules are when you start with the financial institutions. you're going to get notified every time they make a change and you're going to be notified

any day of the night or day when you simply go onto the website and look at the required privacy notification. when graham-leach-bliley was passed, not everybody had access to the internet. i realize today not everybody does, but a much larger percentage of americans are familiar with the internet, have access to the internet and know that if they want to see the privacy notification of the privacy rules of their financial institution it's there on the internet in a way that most americans are going to have easy access to. the idea that you're mailed a copy of something you've already been mailed a copy of, that hasn't changed, that does little or nothing to provide additional privacy except we can say -- if we want to protect the privacy of our constituents we ought to

do so in a meaningful way, not simply say the same thick you got a copy of a -- thing you got a copy of a year ago today that is available to you any time of the day or night is something we're going to chop down some more trees and send you a copy of again and that's the best idea we can come up with to protect your privacy. i think instead we ought to pass this bill, know that we've given everybody a copy of the privacy on paper, the privacy policy of the football institution, that they get another pape -- of the financial institution, that they get another notification if there's any change and continuing notice on the internet every day of the year, every night of the year. with that i would yield one minute to the gentleman from massachusetts. mr. markey: for anyone who is listening, the american civil liberty opposes this, the consumer union, the liberty

coalition opposes this. the patients privacy act coalition opposes this. and the reason is this. you sign up with a bank 10 years ago, megabank inner corps rated, they send you -- incorporated, they send you a privacy notice. then every year for the next 10 years they buy a new entity that locks right in as an affiliate and you've signed off on everything they do but they don't have to notify you that this new entity is going to have a totally new use for that information. but you're supposed to have, in 2002, have already been notified. moreover, ladies and gentlemen, why can't they just email this notice each year to people? why can't they just email it to people? here's your privacy. and every year it goes out, no trees chopped down, nothing done that affects the environment, just everybody gets the email, each year. here's your privacy rights. and it goes in a separate email so that everyone is really

getting the opportunity to single it out. the speaker pro tempore: the gentleman's time has expired. mr. sherman: i thank the gentleman for his presentation, would be happy to co-sponsor legislation to require email notification once a year to every customer who is willing to provide their email address to the financial institution. there are some who would say, i don't want to give my email address to my financial institution but everybody willing to provide that email, i couldn't agree with you more. if this was done by email, it ought to be done at least annually and i look forward to joining with the members who are here in this room and are interested in this in requiring annual email notification. i don't know if the sponsor of the bill would be interested in that but i would join the gentleman from massachusetts in legislation on that. but let's act today to end the

expensive and resource-consuming annual paper notification and with that i reserve the balance of my time. the speaker pro tempore: the gentleman from california reserves. the gentlewoman from west virginia is recognized. mrs. capito: thank you. i'd like to yield to the gentleman from missouri. the speaker pro tempore: the gentleman from missouri is recognized for such time as he may consume. >> thank you, madam speaker, and thank you, chairwoman capito. just to respond to some of the comments that have been made, first i want to thank the gentleman from massachusetts and the gentleman from texas for their work on the privacy notice and protect of our private information. it's extremely important and i applaud those efforts and i support those efforts. if you look at this particular bill, this is not an effort to thwart any sort of ability for people to protect their private information within the privacy

law. there's all sorts of other protections. it doesn't change one single dot or -- of an i or cross of a t on the rest of the notification that's there, whether it deals with the kind of information you can collaborate on or the kind of information that you can be a part of. all it does is to say that the notification that is supposed to be required annually is not made. unless there's a change. now, the gentleman from massachusetts made some comments with regard to -- madam speaker, with regard to the amount of mail he gets from the banks. that's not necessarily something that is the compliance area, it's called marketing. they're trying to market for their credit cards or services. that's part of their marketing budget and that's where those dollars come from, to be able to do those things. that's part of being a bills. when it comes time for the changes that have to be notified, when individuals are

notified, whenever you merge a nother bank or institution with others you will receive a new notice because, quite frankly, obviously there will be a change in the information that's going to be held by the banks. you'll be node ♪ified of that because it is -- you'll be notified that have because it is a significant change. i'm not sure that the gentlemen who have spoken in opposition have thought through their arguments. all we're doing is allowing for bookkeeping things to be done here. we're not impacting the individual's privacy at all. i think if you went on the street and you asked 10 people if they thought this was a good idea or not, i'd guarantee you i think there would be at least nine and one would be, well, i can take it either way. i don't see any opposition to -- from the consumers themselves whenever they're paying for these notices through higher charges to their bank accounts. so i think there's a lot of good we're trying to do here. we're not trying to change the

world. all we're trying to do is continue to protect the integrity of the information of the banks and credit unions are holding on these individuals and pry the ability of those shoolings -- and provide the ability of those institutions to do it in a more cost-effective manner. i yield back. thank you. . the speaker pro tempore: the gentleman yields back. the gentleman from california is recognized. mr. sherman: i would state that i agree with the gentleman from massachusetts that we ought to require email notification of what the privacy policy is annually as a good compromise. i would hope that some of the others here on the floor would take a minute to comment on that or i would yield to them. obviously such an email could be sent only to those customers who voluntarily provide their email address to the financial institution. but when you look at the idea of a -- an expensive postal mailing

using resources to provide an exact copy of something that was previously mailed on hard copy, or in hard copy, on paper, to the same consumer a year earlier, on balance, that is not a good use of societal resources, nor a good use of most consumers' time. i think the fact that these policies are up on the web and available whenever somebody takes an interest in them is also important. and with that, i reserve the balance of my time. mrs. capito: does the gentleman have more speakers? i'm prepared to close if you're prepared. mr. sherman: i have no speakers. i would just add that there are many of us who are dedicated to

privacy but not every privacy requirement makes sense. here's a case where people are notified on paper, and finally, i want to address the gentleman from massachusetts' comments that maybe when you were notified on paper your financial institution only had two oar three subsidiaries and 10 years later they have several more subsidiaries with whom they share information but the fact is, that isn't disclosed in another copy of the financial institution's privacy policy. so it may in fact be that your financial institution is offer manager products, sharing information with more subsidiaries. but voting down this bill is not a solution to that issue. what is a solution is to have a policy where you have to send it in writing once, send it in writing when it chames prorkvide

it on the web, and i would join with others, i hope, in introducing legislation requiring annual email distribution. with that, i have no speakers, i have no further comments, i have asked, i believe, that the statement of professor lev tan -- levitan be included in the record and with that i yield back my time. the speaker pro tempore: the gentleman yields back. the gentlewoman from west virginia recognized. mrs. capito: thank you. i recognize myself just to close to say, privacy is an issue that's a concern to all of us. in new ways of communicating that we have and we can only imagine in our future, init becomes more and more difficult. i would respond to the swrelt from california when he says email notices, i haven't discussed it with the bill's sponsor but i wouldn't have an objection to that, however many of us live in areas where the penetration of email is not like

it is in california or massachusetts or probably areas of texas. so there's a long way to go before that could be -- but maybe next time this is debated in 10 years or whatever, that would be the norm, so i would make sure that that option for those who want to receive the paper can still do that. but i think we're overcomplicating this issue, quite frankly. i think it is a commonsense revision. if we took the gentleman's 10 people he met on the street and said what would you think if we didn't mail these, if the bank didn't mail these privacy policies to you every year, if you asked them how many actually read them point by point, and i can put myself in this cat-for--- category, it's very small as well. not that it doesn't need to be publicly available and we need to have notification when it changes but i believe serve thoke financial services committee, i think it's become very apparent when you talk to

institutions and when you talk to customers that the piling on of new regulations without weeding out some of the old regulations that have either been antiquated or duplicative or repetitive or wasteful or whatever is burdening not just the institutions, it's burdening the customer too. it leads to, i think, i'm not sure it gets the wanted understanding of what's going on to the customer that we're trying to achieve here. i do believe it's been -- overcomplicated. mr. sherman: if i could ask you to yield so i can let our colleagues know, substantially this bill was passed by the house as part of a package in march 8, 2006. this bill was pretty much in this exact form was passed by this house june 24, 2008, as part of a package and then finally as a separate bill, h.r.

3506, was passed by this house on april 14, 2010. so the house has a strong record of passing this legislation. i hope we continue to do so. i thank the gentlelady for yielding. mrs. capito: i thank the gentlelady for bringing that up. with that, i urge support of this bill and i yield back the balance of my time. the speaker pro tempore: the gentlewoman yields back. the question is, will the house suspend the rules and pass the bill h.r. 5817? those in favor say aye. those opposed, no. in the opinion of the chair, in the opinion of the chair, 2/3 being in the affirmative, the rules are suspended -- the gentleman from california is recognized. mr. sherman: madam speaker, on that i demand the yeas and nays. the speaker pro tempore: the yeas and nays are requested. those in favor of taking this vote by the yeas and nays will rise and remain standing until counted. a sufficient number having risen, the yeas and nays are ordered.

pursuant to clause 8 of rule 20 and the chair's prior announcement, further proceedings on this motion will be postponed. the chair lays before the house a communication. caller: the honorable the speaker, house of representatives, sir, pursuant to the permission granted in clause 2-h of rule 2 of the rules of the u.s. house of representatives, the clerk received the following message from the secretary of the senate on december 3, 2012, at 3:08 p.m., that the senate passed senate 2170, that the senate agreed to senate resolution 607, with best wishes, i am, signed sincerely, karen l. haas. the speaker pro tempore: the chair will entertain requests for one-minute speeches. for what purpose does the gentleman from oregon rise?

>> madam speaker, i ask unanimous consent to address the chamber for one minute. the speaker pro tempore: the gentleman is recognized for one minute. >> madam speaker, i rise today to ask labor secretary hill do solis a simple question on behalf of the farmers of oregon. when will we get answers about the department's heavy-handed enforcement tactics? in august mitigating circumstance colleagues and i from the oregon delegation, republicans and democrats alike, wrote to the secretary about reports that the department of labor had been discarding due process and appeal and using orders to deal with farms in the northwest. mr. walden: we are still waiting for a written response 108 days later. we know the department can move with great speed when it wan -- wants to, when it's trying to shut down a farm with little due process or appeal. so why does it take so long to get answers for oregon farmers? i ask the secretary to clarify in writing the process.

no one is arguing for unfair labor practices but our farmers deserve due process and a clear understanding of what to expect from an investigation. only the department of labor can provide these answers to oregon's congressional delegation and the citizens we represent. 108 days later, we and they still do not have those written answers. and that is simply unacceptable. the speaker pro tempore: the gentleman's time has expired. for what purpose does the gentleman from texas rise? >> madam speaker, i rise to address the house for one minute and revise and extend my remarks. the speaker pro tempore: the gentleman is recognized for one minute. >> thank you, madam speaker, i rise in strong support of freshman sensation johnny "football" man zell's quest to become the first freshman to win the heisman trophy. mr. barton: he's lead the aggies

to a 10-2 record this year losing tonl florida who is currently ranked number three in the nation and to l.s.u., who i believe is currently ranked number seven in the nation. he has broken the record for total offense not once but twice this year in the southeastern conference. his total offense for the year exceeds that of both cam newton of auburn and tim tebow of florida when they were playing and they both won the heisman trophies in their year. texas a&m is going to play oklahoma in the cotton bowl on january 7. it would be a supreme blessing if the heisman trophy voters for the first time were to vote for johnny "football" man zell, quarterback of the fighting texas aggies. with that, i yield back. the speaker pro tempore: the gentleman yields back.

the gentleman from texas is recognized. mr. barton: wearing myself out working this afternoon, i move that the house now adjourn. the speaker pro tempore: the question is on the motion to adyourn -- adjourn. >> we look at some of the tax credits and deductions to expire as part of the fiscal cliff. >> as part of our series looking

into the so-called fiscal cliff, we turn to deductions and tax loopholes. some are potentially on the chopping block as congress and the white house negotiate how to move forward. joining us is john mccain, thank you for being here this morning. what are loopholes and deductions? we hear those words a lot. >> loopholes are really in the eye of the beholder, tax breaks of all different sorts. and whether you like a particular loophole depends on where you said. deductions are the ones most people are most familiar with. the big itemized deductions are the home mortgage interest deduction. the deduction for charitable contributions is important. there are all kinds of other breaks.

there are some that are big that people may not be aware of. the health care that we get a work represents a big source of income to a lot of people. it doesn't count as income on your taxes. that is a giant break in itself and known as an exemption. there are other breaks that exist. the earned income tax credit goes to the working poor. then folks with children get a child credit that is a lucrative credit, worth $1,000 per child right now. congress loves tax breaks. host: is there a difference between a deduction and tax credits?

guest: a deduction is something you take off your income. a credit is something that is taken away from the tax that you owe. if you owe $20,000 in tax and get $1,000 tax credit, you're down to $19,000. host: is loopholes a term that congress likes? guest: they are talking about things they would like to get rid of or scale back. tax breaks are a little bit more neutral. host: are there any sacred cows in deductions? guest: definitely. almost every tax break has a constituency.

when congress starts to think about getting rid of some of these things, the constituencies, out of the woodwork. a classic example is the home mortgage interest deduction. there is real estate in every congressional -- you'll hear from a lot of people about it. host: it cost the government about $100 billion. who benefits? guest: realtors, home builders. host: is the average american seeing a benefit? guest: everyone with enough

wealth to be able to buy a home will benefit from this break. in terms of the percentages, people in the middle class and upper middle class benefit the most from this. there are limits on your ability to deduct home mortgage interest if you are extremely wealthy. rich folks do not benefit as much as folks in the middle class. something that benefits just about everybody who pays the taxes. it is beneficial for people in the high tax states. they tend to be on the east and west coasts and in more affluent states.

they tend to be blue states, as well. host: charitable contributions. who uses that? guest: that tends to benefit a broad range of people. it is surprising how people at the lower and giveaway. wealthy people donate allied. mitt romney gave away millions and millions of dollars. host: things like capital gains dividends and other things that benefit wealthier in comes? guest: the caplet gains and dividends is the classic break that benefits the wealthy. they think it is correct if they receive more than 90% of the benefit. people and the middle class get

a little benefit from that break. the majority of the break goes to the wealthy. host: there is a recent story from politico. host: how significant of these deductions? guest: they can be important. the goal is to not get rid of the budget deficit. lots of people do not want to get rid of the budget deficit. they want to get it down to a manageable level. opinions differ.

you can make a big dent through closing or reducing the loopholes. host: do you expect them to play a role? could they end up on the chopping block? guest: republicans have put them on the table. i think you probably will see some of both. this is a process that will go on for the better part of the next year. during that process, you will see some of both. host: john mckinnon is a reporter for "the wall street journal." here are the numbers to call.

republicans, 202-585-3881. democrats, 202-585-3880. independent callers, 202-585- 3882. let's go to the phones. good morning. caller: hi. i like to talk about two sections of the economy that pay very little. apple computer has operations abroad. they play low wages and help lose jobs here. they pay no taxes on what they make. they operate abroad. they have access to american markets. there are the tax so-called

charitable foundations who pay no taxes. two of the richest men in our country, warren buffett and gates put all their $140 billion into a charitable trust. i like to hear your comments about these things. host: do you take advantage of deductions? caller: very little. they tax my social security. host: ok. john mckinnon. guest: the caller makes two good points. major corporations pay lower tax rates.

high-tech companies pay very low tax rates. this is a problem that companies around the world are a part of. u.s. companies are not the only ones. there is a global race to the bottom in terms of tax rates. there are lots of tax havens around the world and these countries are taking advantage of these tax haven countries. some of them are big western european countries. it is a problem that leaders of governments around the world are trying to address but it is difficult. there is global competition for

the business of these companies. they are drawn to the countries with the lowest tax rates. the companies will say they do pay more tax then you realize. they pay pretty low corporate income taxes in many circumstances. host: we are talking about tax loopholes and deductions. you can tweet with the hash tag "fiscal cliff." you can find all kinds of issues surrounding the so-called fiscal cliff. we have some followers on twitter weighing in. host: do you agree with these comments?

guest: i do. i think that is basically true. there is one that was passed during the bush administration which was a low rate for capital gains and dividends. now many democrats view that as a loophole. it was approved by congress last than a decade ago. host: robert from texas is next. caller: thank you. i am retired and i saved money all my life and put it in an ira and put my pension benefits into my ira. if there is a large change, it

will not affect me because i don't own stock outside of it. but it will affect everybody in terms of the return they get from the market. people don't realize that change in capital gains and dividends will affect your pension funds and things they can do later on. what would you recommend a person do? guest: there is a debate about how much capital gains and tax rates affect the market. if we go off the fiscal cliff and congress doesn't take any action to soften the blow, tax rates will go up quite a lot on dividends, from 15% to more than 40% in most circumstances.

there are economists who think that will have a big impact on stock markets and they could go down 10%, maybe 20%. i do not think those effects are as strong as some economists believe. i think it is something the market could get over. you're in a long term tax and vanished savings situation.

i think you are basically going to be fine unless you're planning on retiring release soon. i do think that is something you have to keep in mind. diversification out of the assets that are most affected by these kinds of taxes is probably never a bad idea. host: john mckinnon is a reporter for "the wall street journal." he is now in the washington bureau. he was a columnist for "the miami herald." what sectors would be hit harder if deductions and loopholes or taken out of the tax code? guest: the stocks that pay a

high dividend. these tend to be utility stocks. there are lots of old, established, u.s. industrial firms. some of the high-tech firms have started paying dividends. dividends take the biggest hit if we go off the fiscal cliff. that is a huge change. that is a huge change.